No, not the musical kind that spin around and create great music! Have you got records of your business or personal activities?
The resounding response to this question is usually no. This is upsetting. Why don’t you keep records? Top 3 reasons:
1. It is a foreign concept, ie: you don’t want to!
2. You don’t know how to.
3. It takes too long for the value received
Whatever the reason, the purpose of keeping records is obvious to any administratively-minded person or somebody who likes to keep everything in order. How these records are kept is also varied. The packet is one option. This is an accountant’s nightmare. It involves all slips being piled into a packet or box.
The ideal is to capture everything real time into a computer system of some sorts. This can range from an excel spreadsheet to a online accounting package such as SageOne, Zoho or Xero, to name a few.
The end result of this recording is to pull out reports with relevant and useful information that can help you gain insight into your business. This will enlighten you on areas of concern or great initiatives to proceed with. You can have a simple report or go more detailed than you could ever imagine. The level of information is based on the quality of information recorded.
For the average company, keeping everything in roughly the same place is probably as technical as they get. Sometimes this results in monthly reports and sometimes this results in a massive packet being delivered to your accountant followed by a big bill and a set of financial statements.
It really does not matter which you use. It only matters that they are accurate and complete.
What does this mean?
Every business transaction must be recorded. Every invoice sent to clients and every invoice paid out by you. Other expenses such as salaries and telephone etc. also need to recorded. Transactions can be recorded from the bank statements or from invoices.
Remember, it is not what you received or paid out that has to be recorded but the invoice amount.
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